Annual report pursuant to Section 13 and 15(d)

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Tables)

v3.19.3.a.u2
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Tables)
12 Months Ended
Dec. 31, 2019
Pension and Other Postretirement Benefit Plans [Abstract]  
Changes in benefit obligations and the fair value of plan assets for our benefit plans
The following table sets forth the changes in benefit obligations and the fair value of plan assets for our benefit plans (in millions):
 
Pension Benefits
 
Other Benefits  
Year Ended December 31,
2019

2018

 
2019

2018

Benefit obligation at beginning of year1
$
8,015

$
9,469

 
$
719

$
795

Service cost
104

124

 
9

11

Interest cost
291

296

 
28

25

Participant contributions2
1

1

 
20

9

Foreign currency exchange rate changes
(28
)
(112
)
 
(2
)
(7
)
Amendments
(1
)
1

 

(8
)
Net actuarial loss (gain)
931

(470
)
 
71

(35
)
Benefits paid3
(537
)
(358
)
 
(86
)
(70
)
Business combinations4

60

 

1

Divestitures

(11
)
 


Settlements5
(19
)
(932
)
 


Curtailments5
(2
)
(63
)
 
(2
)

Special termination benefits5
1

7

 


Other
1

3

 

(2
)
Benefit obligation at end of year1
$
8,757

$
8,015

 
$
757

$
719

Fair value of plan assets at beginning of year
$
7,429

$
8,866

 
$
289

$
288

Actual return on plan assets
1,111

(269
)
 
38

(5
)
Employer contributions
36

107

 


Participant contributions2
1

1

 
15

9

Foreign currency exchange rate changes
(26
)
(131
)
 


Benefits paid
(453
)
(287
)
 
(3
)
(3
)
Business combinations4

30

 


Divestitures

(1
)
 


Settlements5
(18
)
(892
)
 


Other

5

 


Fair value of plan assets at end of year
$
8,080

$
7,429

 
$
339

$
289

Net liability recognized
$
(677
)
$
(586
)
 
$
(418
)
$
(430
)
1 For pension benefit plans, the benefit obligation is the projected benefit obligation. For other benefit plans, the benefit obligation is the accumulated postretirement benefit obligation. The accumulated benefit obligation for our pension plans was $8,607 million and $7,867 million as of December 31, 2019 and 2018, respectively.
2 In prior year disclosures, participant contributions were included in the Other line item.
3 Benefits paid to pension plan participants during 2019 and 2018 included $84 million and $71 million, respectively, in payments related to unfunded pension plans that were paid from Company assets. Benefits paid to participants of other benefit plans during 2019 and 2018 included $83 million and $67 million, respectively, that were paid from Company assets.
4 Business combinations were primarily related to the acquisition of a controlling interest in the Philippine bottling operations in 2018. Refer to Note 2.
5 Settlements, curtailments and special termination benefits were primarily related to our productivity and reinvestment program and the refranchising of certain of our North America bottling operations. Refer to Note 2 and Note 20.
Pension and other benefit amounts recognized in consolidated balance sheets
Pension and other benefit amounts recognized in our consolidated balance sheets are as follows (in millions):
 
Pension Benefits
 
Other Benefits  
December 31,
2019

2018

 
2019

2018

Other assets
$
998

$
813

 
$

$

Accounts payable and accrued expenses
(72
)
(70
)
 
(21
)
(21
)
Other liabilities
(1,603
)
(1,329
)
 
(397
)
(409
)
Net liability recognized
$
(677
)
$
(586
)
 
$
(418
)
$
(430
)

Schedule of pension plans with projected benefit obligation in excess of fair value of plan assets
Certain of our pension plans have projected benefit obligations in excess of the fair value of plan assets. For these plans, the projected benefit obligations and the fair value of plan assets were as follows (in millions):
December 31,
2019

2018

Projected benefit obligations
$
7,194

$
6,562

Fair value of plan assets
5,515

5,163


Accumulated benefit obligations in excess of fair value of plan assets
Certain of our pension plans have accumulated benefit obligations in excess of the fair value of plan assets. For these plans, the accumulated benefit obligations and the fair value of plan assets were as follows (in millions):
December 31,
2019

2018

Accumulated benefit obligations
$
7,052

$
6,451

Fair value of plan assets
5,485

5,157


Total pension assets for U.S. and non-U.S. plans
The following table presents total assets for our U.S. and non-U.S. pension plans (in millions):
 
U.S. Plans  
 
Non-U.S. Plans  
December 31,
2019

2018

 
2019

2018

Cash and cash equivalents
$
364

$
310

 
$
377

$
173

Equity securities:
 
 
 
 
 
U.S.-based companies
1,231

1,116

 
673

644

International-based companies
770

659

 
617

462

Fixed-income securities:
 
 
 
 
 
Government bonds
263

192

 
273

271

Corporate bonds and debt securities
899

745

 
65

90

Mutual, pooled and commingled funds1
279

238

 
619

637

Hedge funds/limited partnerships
652

785

 
37

43

Real estate
337

385

 
5

6

Other
354

412

 
265

261

Total pension plan assets2
$
5,149

$
4,842

 
$
2,931

$
2,587

1 Mutual, pooled and commingled funds include investments in equity securities, fixed-income securities and combinations of both. There are a significant number of mutual, pooled and commingled funds from which investors can choose. The selection of the type of fund is dictated by the specific investment objectives and needs of a given plan. These objectives and needs vary greatly between plans.
2 Fair value disclosures related to our pension plan assets are included in Note 18. Fair value disclosures include, but are not limited to, the levels within the fair value hierarchy in which the fair value measurements in their entirety fall; a reconciliation of the beginning and ending balances of Level 3 assets; and information about the valuation techniques and inputs used to measure the fair value of our pension plan assets.
Other postretirement benefit plan assets
The following table presents total assets for our other postretirement benefit plans (in millions):
December 31,
2019

2018

Cash and cash equivalents
$
57

$
73

Equity securities:
 
 
U.S.-based companies
124

93

International-based companies
9

7

Fixed-income securities:
 
 
Government bonds
3

2

Corporate bonds and debt securities
47

16

Mutual, pooled and commingled funds
84

82

Hedge funds/limited partnerships
7

8

Real estate
4

4

Other
4

4

Total other postretirement benefit plan assets1
$
339

$
289

1 
Fair value disclosures related to our other postretirement benefit plan assets are included in Note 18. Fair value disclosures include, but are not limited to, the levels within the fair value hierarchy in which the fair value measurements in their entirety fall and information about the valuation techniques and inputs used to measure the fair value of our other postretirement benefit plan assets.
Net periodic benefit cost for pension and other postretirement benefit plans
Net periodic benefit cost (income) for our pension and other postretirement benefit plans consisted of the following (in millions):
 
Pension Benefits  
 
Other Benefits  
Year Ended December 31,
2019

2018

2017

 
2019

2018

2017

Service cost
$
104

$
124

$
197

 
$
9

$
11

$
17

Interest cost
291

296

306

 
28

25

29

Expected return on plan assets1
(552
)
(650
)
(650
)
 
(13
)
(13
)
(12
)
Amortization of prior service credit
(4
)
(3
)

 
(2
)
(14
)
(18
)
Amortization of net actuarial loss2
151

128

175

 
2

3

8

Net periodic benefit cost (income)
(10
)
(105
)
28

 
24

12

24

Settlement charges3
6

240

228

 



Curtailment charges (credits)3

5

4

 
(2
)
(4
)
(79
)
Special termination benefits3
1

7

106

 



Other
1


1

 

(1
)

Total cost (income) recognized in
   consolidated statements of income
$
(2
)
$
147

$
367

 
$
22

$
7

$
(55
)
1 
The Company has elected to use the actual fair value of plan assets as the market-related value of assets in the determination of the expected return on plan assets.
2 
Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to 10 percent of the greater of the benefit obligation and the market-related value of assets. Gains and losses in excess of the corridor are generally amortized over the average future working lifetime of the plan participants.
3 
Changes in AOCI for benefit plans
The following table sets forth the changes in AOCI for our benefit plans (in millions, pretax):
 
Pension Benefits  
 
Other Benefits  
 
Year Ended December 31,
2019

 
2018

 
2019

 
2018

 
Balance in AOCI at beginning of year
$
(2,482
)
 
$
(2,493
)
 
$
(15
)
 
$
(26
)
 
Recognized prior service cost (credit)
(4
)
 
1

3 
(4
)
5 
(18
)
6 
Recognized net actuarial loss
157

1 
369

4 
2

 
3

 
Prior service credit (cost) occurring during the year
1

 
(1
)
 

 
8

 
Net actuarial (loss) gain occurring during the year
(370
)
2 
(386
)
3 
(44
)
5 
17

 
Impact of divestitures

 
4

 

 

 
Foreign currency translation gain
20

 
24

 
2

 
1

 
Balance in AOCI at end of year
$
(2,678
)
 
$
(2,482
)
 
$
(59
)
 
$
(15
)
 

1 
Includes $6 million of recognized net actuarial loss due to the impact of settlements.
2 
Amounts in AOCI for benefit plans (pretax)
The following table sets forth amounts in AOCI for our benefit plans (in millions, pretax):
 
Pension Benefits  
 
Other Benefits  
December 31,
2019

2018

 
2019

2018

Prior service credit (cost)
$
(12
)
$
(12
)
 
$
23

$
28

Net actuarial loss
(2,666
)
(2,470
)
 
(82
)
(43
)
Balance in AOCI at end of year
$
(2,678
)
$
(2,482
)
 
$
(59
)
$
(15
)

Amounts in AOCI expected to be recognized as components of net periodic pension cost in next fiscal year
Amounts in AOCI expected to be recognized as components of net periodic benefit cost in 2020 are as follows (in millions, pretax):
 
Pension Benefits
Other Benefits

Amortization of prior service credit
$

$
(2
)
Amortization of net actuarial loss
171

5

Total
$
171

$
3


Certain weighted average assumptions used in computing the benefit obligations and net periodic benefit cost
Certain weighted-average assumptions used in computing the benefit obligations are as follows:
 
Pension Benefits
 
Other Benefits  
December 31,
2019

2018

 
2019

2018

Discount rate
3.25
%
4.00
%
 
3.50
%
4.25
%
Rate of increase in compensation levels
3.75
%
3.75
%
 
N/A

N/A

Certain weighted-average assumptions used in computing net periodic benefit cost (income) are as follows:
 
Pension Benefits  
 
Other Benefits  
Year Ended December 31,
2019

2018

2017

 
2019

2018

2017

Discount rate
4.00
%
3.50
%
4.00
%
 
4.25
%
3.50
%
4.00
%
Rate of increase in compensation levels
3.75
%
3.50
%
3.75
%
 
N/A

N/A

N/A

Expected long-term rate of return on plan assets
7.75
%
8.00
%
8.00
%
 
4.50
%
4.50
%
4.75
%

Assumed health care cost trend rates :
December 31,
2019

2018

Health care cost trend rate assumed for next year
6.75
%
7.00
%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
5.25
%
5.00
%
Year that the rate reaches the ultimate trend rate
2025

2023


Estimated future benefit payments for funded and unfunded plans
Our estimated future benefit payments for funded and unfunded plans are as follows (in millions):
Year Ended December 31,
2020

2021

2022

2023

2024

2025–2029

Pension benefit payments
$
462

$
468

$
476

$
485

$
498

$
2,543

Other benefit payments1
60

58

56

54

52

240

Total estimated benefit payments
$
522

$
526

$
532

$
539

$
550

$
2,783

1 
The expected benefit payments for our other postretirement benefit plans are net of estimated federal subsidies expected to be received under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Federal subsidies are estimated to be $3 million for the period 2020–2024 and $2 million for the period 2025–2029.